Not all service members are eligible to participate in the new program and there are many factors to consider when deciding to switch.

Here are the key points of the blended retirement system to help you understand the new program.

What are the 2 retirement systems for service members?

Under the legacy retirement system, a service member is required to serve a minimum of 20 years to receive retirement pay. If they get out before then, they received nothing toward retirement. The military has realized that not many service members stay until the 20 year mark.

The new blended retirement system was created to allow all service members to leave with something toward retirement even if they do not stay in the service for a long period of time.

The new program blends the legacy retirement pension with a defined contribution that goes toward a service member’s Thrift Savings Plan (TSP). This is basically like combining the pension plan with a 401(k) type plan. The longer a service member stays in, the higher their pension will be. The blended retirement system also takes into account inflation and adjusts based on the annual cost of living adjustment.

The new blended retirement system was created to allow all service members to leave with money toward retirement even if they do not stay in the service for 20 years.

Who is eligible?

Anyone entering the military from January 1, 2018, on will be automatically entered into the blended retirement system. All service members that are active as of December 31, 2017, are already in the legacy program and will remain in it. They will not be automatically switched to the new blended retirement system.

Service members with less than 12 years as well as Reserve with less than 4,320 retirement points as of December 31, 2017, have the option to switch to the blended retirement system. These service members have all of 2018 to make the decision to switch, but once the decision is made, it cannot be changed.

Those that do change to the blended retirement system will be required to take a mandatory opt-in course through Joint Knowledge Online or through Military OneSource.

Who is not eligible?

All service members with 12 years or more in service prior to December 31, 2017, are grandfathered into the legacy retirement system and remain in it. There is nothing in their retirement plan that will change. If you are in this category and would like to review the legacy system, you can see that here.

What are some benefits of the blended retirement system?

Should you opt into the new blended retirement system or stay with the legacy retirement? This mostly depends on how long you plan on staying in the military.

If you serve less than 20 years and are on the legacy system, then you won’t get a monthly annuity or government contributions to your TSP account when you get out. If you switch to the blended retirement system, then you will have money toward retirement.

Here are a few benefits to consider in the new program.

Contributions

Under the blended retirement system, the government will automatically contribute 1% to your retirement. Additionally, you can receive up to 4% in service matching contributions if you elect to put more toward your retirement. Automatic and matching contributions will end at 26 years of service.

New service members are not eligible for the up to 4% match until the start of the 25th month of service. They will however get the automatic 1% contribution after being enrolled for 60 days.

Portability

When you leave the service, you can have your TSP transferred to an IRA or to an eligible employer’s 401(k).

Bonus Pay

Service members can receive a one-time bonus pay by agreeing to serve more time. This is known as continuation pay and is payable between performing 8 and 12 years of service. The bonus pay could be between 2.5 and 13 times your regular pay based on the service-specific retention needs. If this bonus pay puts you in a higher tax bracket, you can opt to receive your bonus in 4 equal payments over 4 years instead.

Lump Sum

When you retire, you’ll have the option to take your retirement payment as a lump sum. That sum would be a discounted portion of the retirement pay however. You can choose to take 25% or 50% as a lump sum.

If you do not choose to do a lump sum, then you will receive your retirement check monthly.